Live updates from the G20 summit in Cannes

Europe's debt drama is dominating talks among leaders of the Group of 20 leading economies Thursday, with Greece's government facing potential collapse and European leaders admitting that the eurozone may face losing its weakest member. Prime Minister Stephen Harper, who arrived in Cannes today, and the other G20 leaders are scrambling to contain the Greece debt crisis which has come to dominate the summit. European leaders agreed last week to boost a bailout fund for Greece, but the plan has been thrown into doubt by the surprise decision by Prime Minister George Papandreou to hold a referendum on the euro zone bailout. Infighting and defections within the ruling socialist party have pushed the government to the brink of collapse. Globe reporters Doug Saunders and Eric Reguly will provide updates throughout the day from Cannes.

Welcome to our live coverage of the G20 summit in Cannes, France. Follow us for live updates from Globe and Mail reporters Eric Reguly and Doug Saunders at the summit. Find full stories throughout the day at www.ReportonBusiness.com and The Global Exchange blogAnd share your thoughts and questions with us by sending a comment.

by Claire Neary11/2/2011 10:31:38 PM

0945 local time: From Eric Reguly in Cannes

Reporters are just dribbling into the vast media centre in Cannes after a very late, but extraordinary, night which saw France president Nicolas Sarkozy and German chancellor Angela Merkel read the riot act to Greece: Either you're in or out of the euro zone, and if you're out -- guess what? -- no more bailout money for you.

Today, we're wondering if the G20 summit has already peaked even before it officially starts this morning. It feels like the story has already shifted back to Athens. Indeed, Mr. Papandreou faces a confidence vote in the Greek parliament Friday. If he wins -- his socialist Pasok party has paper-thin majority in the 300-seat chamber -- it is likely the referendum that so angered Mr. Sarkozy and Ms. Merkel will go ahead; the tentative date, confirmed last night by Mr. Papandreou, is Dec. 4 and the citizens' vote will effectively determine whether Greece stays put or flees the euro zone and re-embraces the old drachma.

So that leaves a full month of uncertainty that could be deadly to the Greek economy and ripple through through Europe. Greeks have already been yanking their savings from Greek bank accounts for fear that the banking system will collapse and that the clapped-out government might be incapable of honouring its deposit insurance. Now that the referendum is going ahead, expect a wholesale exodus of funds. That will put more strain on the banks. Some could be nationalized; others will be forced into mergers (a process that is already underway).

A couple of weeks ago in Athens, I interviewed an Alpha Bank manager -- a middle-aged woman -- who told me that her clients have been taking money from the branch since the financial crisis started in 2008 and and that the pace is accelerating. She said she is doing the same, even as she is required to put on a brave face to her clients, assuring them that their bank is safe.

The referendum will no doubt terrify bank clients. If Greeks opts for an exodus from the euro zone, the drachma will come back and economists guess that it would instantly lose half its value against the euro, wiping out the savings of millions of Greeks. The smart money is already gone into German, British, Canadian and offshore banks.

A run on the Greek banks, in turn, could accelerate the banking crisis in the other ailing economies in the euro zone. Will the Portuguese and Irish keep their savings in their banks?

Mr. Papandreou has a near impossible job between now and the referendum and it is nothing less than sparing Greek banks from a premature death. What is his plan?

by Rob Gilroy11/3/2011 10:01:06 AM

In Athens, Greek Finance Greek Finance Minister Evangelos Venizelos has come out against holding a referendum on the euro zone bailout, breaking ranks with his prime minister as the government faces collapse.

by Rob Gilroy11/3/2011 10:05:37 AM

Looks like another bad day ahead for global markets. Yesterday's soothing words by Fed chief Ben Bernanke have largely been forgotten.

Will two European governments fall this week?:MILAN (AP) — Premier Silvio Berlusconi's government teetered Thursday after its failure to come up with immediate growth measures to present to G-20 leaders in Cannes exposed growing fissures in the governing coalition and sent Italian borrowing rates again to dangerously-high levels.

Berlusconi met with his Cabinet late into the evening in an attempt to agree on a decree that would give immediate effect to emergency measures. Instead, Berlusconi goes to Cannes with proposed legislation, requiring approval by a divided Parliament , that would, among other things, sell off government property and privatize a limited category of local public services.

Reuters reporting that efforts underway in Athens to form a unity government:"A small group of senior Greek ruling party lawmakers are preparing a proposal for a coalition government headed by former European Central Bank Vice President Lucas Papademos, sources in Prime Minister George Papandreou’s party told Reuters on Thursday.

"The group is trying to convince Papandreou to quit and leave the way for Papademos, a respected figure in Greece, to head a so-called “unity” government that takes Greece back from the brink of financial collapse."

by Rob Gilroy11/3/2011 11:18:30 AM

Good morning. Just spoke to Athens. Papandreou's chief of staff Regina Vartzeli has announced he does not intend to resign...rumors persist.

The Canadian G20 press conference in Cannes this morning exposed something odd. While Bank of Canada governor supports the Greek referendum, the office of prime minister Stephen Harper won't say whether Harper does too. All his spokesman would say is that the preem wants a "Europe-led solution" to crisis and wants the Oct. 27 EU summit anti-crisis measures implemented quickly. Could there be a split between the two?

by Eric Reguly11/3/2011 11:33:23 AM

Former IMF chief, economist Ken Rogoff on BBC R4 this morning: Greeks "are going to end up defaulting hugely no matter what."

07:40 ET: Markets turning higher on prospects that Greek referendum will be cancelledMILAN (AP) — European stocks gained Thursday amid mounting expectations that a Greek referendum on a European bailout plan will be abandoned.

In Europe, Britain's FTSE 100 swung between gains and losses before edging up 0.5 percent to 5,510. France's CAC-40 rose 1.4 percent 3,153 while Germany's DAX was 1.6 percent higher to 6,062. Athens' main stock market outperformed, rising by over 2 percent. The euro was also buoyed, rising 0.8 percent to $1.3798.

Berlusconi on the ropes, again: Nov 3 (Reuters) - Pressure mounted on Italy’s besieged premier Silvio Berlusconi to quit on Thursday, as six former parliamentary loyalists called for a new government and the squabbling cabinet failed to agree an urgent economic reform programme.

by Rob Gilroy11/3/2011 12:01:08 PM

BBC saying Papandreou will step down to allow cross-party unity coalition govt to form bbc.in